Employee stock options
It's important to us that all Openline team members are invested in the company's ultimate success. Every one of us plays a critical role in the outcome of the business. As such, we all deserve to participate in Openline's success as we grow.
All Openline team members receive stock options as a standard part of their compensation.
What is a stock option?
A stock option gives you the right (but not the obligation) to buy a set number of Openline shares at a set price agreed today, regardless of what the price is in the future. The price fixed today is called the
exercise price. Because your purchase price stays the same, if the value of the stock goes up, you make money on the difference.
If for some reason the stock price never goes up, you are not required to exercise your option. Thus your downside is limited while you fully participate in the upside you help us create.
Who sets the option price?
As a US company, every year we are required to obtain an independent valuation of our shares. This is called a 409a valuation. In order to avoid funky tax treatment, your options will always be granted at the valuation set by the 409a, which the IRS deams to be "fair market value".
Do my options vest?
Yes. All options vest over a period of 4 years with a 1 year cliff. This means:
- On your first employment anniversary, 25% of your options are vested, meaning you can exercise (or purchase) them at any time.
- For every month after your first anniversary, you will vest 1/48th of your remaining options.
What other terms should I know about?
- You have 5 years to exercise your vested options in the event that you leave Openline. Industry standard is 90 days (which we think is bullshit).
- Vesting starts from your start date (not after a "probation period" or similar).
- For UK-based team members, our options are part of the EMI share options scheme, which is tax advantaged.
What if I leave Openline before an "exit event"?
If you decide to leave or resign, you are classified as a
good leaverand your stock options stop vesting on your last day of employment. You retain the option to purchase all vested shares for 5 years after your last day of employment.
If you are let go due to performance issues, or otherwise made redundant, we view that as our mistake and classify you as a
good leaver. Your stock options stop vesting on your last day of employment, and you retain the right to purchase all vested shares for 5 years after your last day of employment.
If you are let go due to gross misconduct, you are classified as a
bad leaver, resulting in a forfeiture of all stock options--regardless of vested status.
Most startups treat all leavers as
bad leavers, giving them the power to determine on a case-by-case basis whether or not you keep your options. Again, we think this is bullshit. In our eyes, if you were honest and did your best work, you earned your vested options. They're yours.
Why don't you just give me the shares?
The simple answer is taxes. Most countries, including the US and UK, consider share grants to be taxable income, meaning you would incur a large tax bill for the pleasure of receiving shares in Openline. The problem is, those shares haven't produced any income yet, so you end up out-of-pocket to acquire the shares.
By structuring the grant as options, you don't owe tax on the shares until you exercise the option, which (hopefully) aligns with an event, such as an acquistion or IPO, that monetizes the shares. This way you only incur a tax bill at the time you recieve money for your shares.